Sunday, 10 March 2019

OVER 50 companies have been liquidated since President
Emmerson Mnangagwa came to power in November 2017, throwing thousands of people
out of employment.

Documents obtained by Standardbusiness from the Master of
High Court’s office showed that 55 companies were granted a provisional order
to be liquidated from November 2017 to December 2018.

Between January and October 2017, 49 other companies were
granted provisional orders to be liquidated.

Theresa Grimmel, who oversees some of the liquidated firms
through her company Trivade (Private) Limited, told this publication that
stringent loan collateral requirements as well as unreliable power suppliers
were to blame for the company closures.

“The cost of borrowing money and the punitive interest and
short-term on loans; the stringent security requirements for loans; the
instability of the electricity network; frequent power outages can cause
machinery to fail — very expensively, and the interruption to the manufacturing
makes it difficult to continue,” said Grimmel, in emailed responses to
Standardbusiness.

“Management is tired — every day there is the need to ‘make
a new plan’, the machinery is old, the skills have left the country. Artisans
are in very short supply.

“The constant changing of the goal posts — refer to the
recent overnight change in the duty rates, this makes business very hard.”

Cheney Pelmets manufactured pelmets, blinds and other
curtain tracks, but the company closed due to lack of security, electricity
challenges and cheap imports.

“It was a long established company and closed because the
facility from, which it operated in Chitungwiza was rented and part of a large
complex. When there was no electricity to enable Cheney to operate its
machinery, the company had to close,” Grimmel said. “It was also facing
competition from cheap Chinese imports.”

On Laputa Trading, Grimmel said: “It was a farm, which
operated on a rental agreement from a new owner.

“The new owner decided to take back large portions of the
farm, despite the lease agreement, and the company was reduced to farming small
portions of the land available.

“Coupled with a bad agricultural season and the fact that
the new owner then held on to all the machinery, the company closed.”

Laputa Trading was granted a provisional order to liquidate
on December 7, 2018, a year after the current government took office.

The closure of these companies is a reflection of serious
economic challenges and is an indictment on Mnangagwa’s “Zimbabwe is open for
business” mantra, observers said.

“For the past 20 or so years we have not found adequate
investment to retool,” said Charles Nhemo, a liquidator.

“Our companies are competing with global entities, which
are using modern technology.

“You talk of a company using equipment, machinery bought
with the latest we have in most companies being in the 80s going back and you
are competing with modern technology, which produces products with less
labour.”

He said Chinese and South African industries, which were
using modern technology, had a competitive advantage as they were in a better
position to churn out improved products.

“The major issue is the economic environment,” Nhemo said.

“When we changed from the Zimbabwe dollar to US dollars,
there was no investment into new equipment and almost every company’s capital
was wiped away because you had no exchange of the Zimbabwe dollar into the US
dollar.

“So whatever you had in your bank was wiped away and
companies are undercapitalised across the sectors.”

Lawyer Tawanda Chiurayi, who handles company liquidations,
said the recent monetary policy changes would make the environment even more
difficult for local firms.

“The question really is looking at the effect of moving
from the one-to-one to the RTGS dollar will have on what people owe,” he said.

“Statutory Instrument 33 of 2019 said whatever amount or
liabilities people have will be converted to RTGS dollars, which in essence
suggests amounts have been discounted by about 2,5, which is the official rate.

“So companies that are heavily indebted and have access to
forex will find that as a benefit, but those who do not have access to forex
will remain in the same position.

“The question would then be: are companies going to be able
to improve production and so forth?

“So, really, it is a question of performance. If they owe
money, then effectively what it means is that they may still be in a very
difficult position.”

A number of companies have been struggling to operate due
to foreign currency shortages that have forced them to either suspend or shut
down some production lines. Standard